Krugman: America the cowardly bully

By Paul Krugman

Tuesday

Mar 5, 2019 at 12:01 AMMar 5, 2019 at 11:08 AM

This is the way the trade war ends. Not with a bang but with empty bombast.

According to multiple news organizations, the U.S. and China are close to a deal that would effectively end trade hostilities. Under the reported deal, America would remove most of the tariffs it imposed last year. China, for its part, would end its retaliatory tariffs, make some changes to its investment and competition policies and direct state enterprises to buy specified amounts of U.S. agricultural and energy products.

The Trump administration will, of course, trumpet the deal as a triumph. In reality, however, it’s much ado about nothing much.

As described, the deal would do little to address real complaints about Chinese policy, which mainly involve China’s systematic expropriation of intellectual property. Nor would it do much to address Donald Trump’s pet although misguided peeve, the imbalance in U.S.-China trade. Basically, Trump will have backed down.

If this is the story, it will repeat what we saw on the North American Free Trade Agreement, which Trump denounced as the "worst trade deal ever made." In the end, what Trump negotiated — the U.S. Mexico Canada Agreement, or USMCA — was very similar to the previous status quo. Trade experts I know, when not referring to it as the Village People agreement, call it "NAFTA 0.8": fundamentally the same as NAFTA, but a bit worse.

Why is the president who famously declared that "trade wars are good, and easy to win" effectively waving the white flag? Mainly because winning turns out not to be easy, at all.

Trump’s beloved stock market hates talk of trade war. There is no broad constituency for protectionism — in fact, public opinion has become much more pro-free trade under Trump. And Chinese retaliation has hit hard at voting blocs Trump depends on, especially in farm states.

Now, agreement with China isn’t a done deal. Trump may also yet open another front in the trade war, against European automobiles. And the Village People agreement awaits congressional approval, and it’s not clear what Trump will do if that isn’t forthcoming.

Still, it looks possible, even likely, that within a few months most though not all of the trade war will have been unwound. So will it all look in retrospect like a passing storm, with few long-term consequences?

No, it won’t. Even if most of the tariffs go away, Trump’s trade belligerence has done lasting damage to America’s reputation, and hence to a global economy that depends on American leadership.

The whole world now knows two things about us. First, we’re not reliable — an agreement with the U.S. is really just a suggestion, because you never know when the president will invent some excuse for breaking it. Second, we’re easily rolled: The president may talk tough on trade, but in classic bully fashion, he runs away if confronted.

On U.S. unreliability, consider the way the current administration has treated Canada, probably the friendliest neighbor and firmest ally any nation has ever had. Despite generations of good relations and a free-trade agreement, Trump imposed large tariffs on Canadian aluminum and steel, invoking national security as a justification. This was obviously specious — in fact, Trump himself basically conceded this point, justifying the tariffs instead as retaliation for Canadian dairy policy (which was also specious).

The lesson for the world is that America can’t be trusted. Why bother making deals with a country that’s willing to slap sanctions on the best of allies, and clearly lie about the reasons, whenever it feels like it?

Meanwhile, the sudden retreat in the confrontation with China shows that we talk loud but carry a small stick. It would be one thing if the U.S. had changed course on the merits. But backing down so easily, after all the posturing, tells the world that the way to deal with America is not to bargain in good faith, but simply to threaten the president’s political base, and maybe offer some payoffs, political and otherwise. (I’m still wondering about those floors China’s largest bank rents at Trump Tower.)

And when it comes to payoffs, autocracies have an advantage over nations that observe the rule of law. China appears to be getting most Trump tariffs removed; Canada still faces those steel tariffs.

Finally, by undermining the international system, America is making the world worse for itself as well as for everyone else. In fact, payback is coming right away.

The World Trade Organization just gave America a big win in a dispute over Chinese agricultural subsidies — but its verdict is probably moot, because the Trump administration has spent the past two years denigrating the organization, and has crippled the appellate body that is supposed to enforce WTO rulings, blocking the appointments that would have given this trade court the quorum it needs to act.

Let’s be clear: Not having a trade war is better than the alternative. But the path the Trump administration has taken to its trade deals has made us less trusted, less respected and weaker than we were before. So much winning!

Paul Krugman (@PaulKrugman) is a columnist for The New York Times.

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